Types of ERP: How On-premise, Cloud and Hybrid differ

An ERP (Enterprise Resource Planning) system is central to managing all of an organisation’s resources and business processes efficiently. Today there are three main deployment models, with clear differences in investment, system maintenance, and flexibility: On-premise, Cloud and Hybrid.

1. On-premise ERP (installed within the organisation)

On-premise ERP is the traditional model, where the organisation invests in purchasing the software licence and installs the entire system on its own server and IT infrastructure, located within the company’s office building or data centre.

• Key difference: The organisation owns and has complete control over the system and all its data.
• Investment and costs:
  • High up front: Requires investing in software licences, hardware (servers), and large-scale infrastructure.
  • Ongoing costs: There are hardware and software maintenance costs, plus the cost of an in-house IT team to manage, update, and fix problems entirely on their own.
• Flexibility and customisation: Very high. The system can be freely customised to fit the organisation’s specialised workflows.
• Access: Access is largely limited to within the corporate network (LAN/WAN).
• Suitability: Suited to large organisations with the budget, a skilled IT team, and strict data security control requirements or specific legal mandates.

2. Cloud ERP (on the cloud)

Cloud ERP, also called cloud-based ERP, is a model that has become highly popular in the digital era. The system is installed and runs on the vendor’s servers or a cloud provider’s infrastructure. The organisation accesses and uses the system over the internet, usually paying a monthly or annual subscription fee.

• Key difference: The organisation rents the software service and does not need to own the IT infrastructure.
• Investment and costs:
  • Low up front: No need to invest in large-scale hardware and software.
  • Ongoing costs: Paid as a monthly/annual service fee (Opex); the vendor is responsible for maintenance, updates, and data backups.
• Flexibility and customisation: Limited, because it is a shared (multi-tenant) system; customisation may only be possible to the extent the vendor allows.
• Access: Very high. The system can be accessed and used from anywhere, anytime, on any device with an internet connection.
• Suitability: Suited to small-to-medium organisations or startups that want to start up quickly, want to reduce the IT team’s burden, and have flexible working policies (remote/hybrid work).

3. Hybrid ERP (a blend)

Hybrid ERP combines the advantages of both On-premise and Cloud. The organisation can choose which parts of the system or which data to keep on internal servers (On-premise) and which parts to move to the cloud (Cloud).

• Key difference: Management and storage of data is divided between internal servers and the cloud.
• Investment and costs: A blend of up-front investment and monthly service fees, depending on the ratio of On-premise to Cloud usage.
• Flexibility and customisation: High, since the On-premise portion can be customised as needed, while the Cloud portion adds agility.
• Access: Can be accessed both from inside and outside the organisation, depending on which parts are placed on the cloud.
• Suitability: Suited to large organisations with complex processes, or with some data that needs especially strict security control (such as financial data), but that also want the agility of working remotely for other parts.

Choosing the most suitable type of ERP does not depend on price alone. You must give serious consideration to the size of the organisation, the budget, the readiness of the IT team, the data security policy, and the complexity of business processes.